The real estate market in Manhattan is one of those topics that will always get people talking.
People love to discuss the endless search for the perfect apartment, renovation disasters, board interviews, what is brand new on the market - and of course
everyone's favorite - trying to predict where the market will move. Nobody has a crystal ball, but I'll periodically provide my thoughts on various residential real estate topics and hope to hear from you. My thoughts on the market dating back to early 2007 are available in
The Morgenstern Report . I certainly don't have all of the answers, but I will provide a broker's perspective into the market and express my thoughts in a way that is enjoyable for both the experienced investor and first time buyer.
We've read all we need to about the serious downturn in the national market that has been going on for two years and how many areas are suffering due to overbuilding, heavy investor concentration, and the ubiquitous
subprime lending crisis.
In Manhattan - and more specifically in established prime neighborhoods like Carnegie Hill we are somewhat protected from these specific causes of a downturn. We don't have
exposure to heavy investor concentration or
subprime lending - and in Carnegie Hill there is certainly no overbuilding.
The increased foreclosure figures that we're seeing nationally, and in parts of the outer boroughs are due in large part to predatory lending and people trying to play a market they probably don't understand. People over-leveraged themselves and now feel they are better off walking away from a house with little to no equity than trying to pay down a debt they know they'll never pay off. Cooperative and condominium management companies and boards in Manhattan do significant due
diligence before allowing new owners and tenants to purchase. This is a critical and often overlooked reason our exposure to this type of problem is almost nonexistent.
My clients often complain about how time consuming and in their eyes, ridiculous, it is to get board approval - yet it is this process that has helped keep our exposure to this downturn to a minimum. Cooperatives require a minimum of a 20% down payment, and often much higher. The boards that oversee each transfer of shares are looking out for the best interest of the existing shareholders. They have no vested interest to allow buyers to get in over their head (unlike a commission-driven loan officer).
Condominiums do not have the right to turn down a buyer, only express their right of first refusal and buy the apartment on behalf of the Condominium. But they do often request (and receive) further documentation from purchasers to give the board comfort that the prospective purchaser can handle the purchase. In fact, the purchase applications for condominiums have gotten as substantial as the standard cooperative board package. If a condominium board is not comfortable with a prospective purchaser they can request that a buyer use a more conservative loan or add money into escrow to ensure financial security.
2007 3rd QuarterThe 3rd quarter results have recently been published, and the results are fantastic. Yet there are things to consider. We don't know if Manhattan prices will be affected at all by the credit crisis because of the duration of the sales cycle. There is generally a 90 day timeline to close a cooperative and 60-75 days for a condominium (significantly longer when buying a new construction project). Therefore, prices were
negotiated prior to any major issues in the credit market became public.
That said, inventory is down, duration that properties are staying on the market has dropped and demand for properties in the best locations is still very high. I've recently taken clients to properties and have run into bidding wars and best and final offers after a property was on the market for only a few days.
Many buyers are nervous that the Manhattan market is not moving in tune with the rest of the country. Nobody wants to buy at the top. We've heard that all before. Days before I signed the contract to purchase my first apartment in Greenwich Village back in 1998, a few people that were "knowledgeable" said that I should wait for the market to come down a little bit - that it was overheated. I sold it in 2001 for twice what I paid.
Nobody knows exactly what will happen, but properly priced apartments in good locations are selling. As we move into autumn the summer slow-down seems to be behind us. Kids are back to school, and the real estate market on the island of
Manhattan is alone... on an island at the top of the heap.
Please
contact me if you have any real estate related questions - or comment on this blog if you have any thoughts about this post.
~Rob
